I have the home in family trust. I am unmarried but have lived with my “wife” for years. She inherits the home by last will. Do we qualify for a reverse mortgage?
For such a short question there are so many possibilities! Firstly, as a lender, we only get so much information and then we do rely on the title and affidavits we receive when originating the loan.
For example, we would do a title search and see that the current title is in the name of your trust and we would get a copy of that trust. We would have a copy of your application that stated you were an unmarried man.
With reverse mortgages there are forms that adult occupants of the property also sign stating that they have no ownership interest in the home and are aware of the transaction. With that documentation there is no problem doing a reverse mortgage loan for someone with your circumstances. Who inherits the home is of no consequence in the making of the loan.
Now, if she does have current ownership interest, then she would have to be considered in the loan and the title would have to reflect her interest as well.
Or if you wanted her to also be included in the loan, as long as she is also 62 years of age or older, you can change the title to include her as well and she can also be included on the reverse mortgage, even though she is not married to you.
If she is not yet 62, she cannot be a non-borrowing spouse because she does not meet the qualifications (under 62 but married to the reverse mortgage borrower at the time the loan is originated).
Under the parameters you have described, you could obtain the loan in your name alone at this time since you are not married and you obtain sole ownership of the property and nothing would prohibit her from inheriting the home upon your passing.
SO, UNLESS SHE IS ON THE TITLE WHEN I DO THE REVERSE, SHE WILL UNABLE TO STAY IN HOME AFTER MY DEATH?
Unless she is on title or is a bona fide non-borrowing spouse, the loan becomes due when the last borrower or non-borrowing spouse at the time the loan is obtained permanently leaves the home.
Under your scenario, she owns the home when you will it to her and there is nothing that says she has to leave the property, but if she does not have the wherewithal to repay the obligation at that time, then she would have to sell the home to pay off the loan if she was not on title at the time the loan was taken and was not a non-borrowing spouse at that time.
We always coach borrowers that they need to understand the options before they close the loan, not after the time comes when a loved one has passed and now they have to scramble.
Your proactive research will help you greatly so that your significant other is not trying to figure this all out at a time in her life when things are difficult enough. The options are as you stated, either to be 62 or over and on title at the time the loan closes, be a non-borrowing spouse or to make other arrangements in advance if you want to proceed with the reverse mortgage.
Some of the other arrangements that non-borrowing spouses have told us about in the past include a life insurance policy in place to pay off the mortgage at the passing of the older spouse, a second home owned by the couple that the non-borrowing spouse intended to move to at that time or family that the non-borrowing spouse had plans to move in with or closer to upon the passing of the older spouse and plans to sell the home at that time anyway.
Absent a clear plan in advance, finding out after a loved one has passed that you now have an obligation that must be repaid with no means to repay it, forcing a move is a terrible way to proceed.
You really need to decide now if you want to take the steps necessary as outlined above to protect your significant other so that she can remain in the home if that is your and her desire or make the determination that the reverse mortgage does not fit with your plans.
Can you get a reverse mortgage if your property is in a trust?
Yes. Having your property vested in a trust does not make it ineligible for a reverse mortgage. However, the trust must be reviewed and approved for HUD guidelines and by the Title Company.
What are my options if my trust does not meet the guidelines to obtain a reverse mortgage?
If your trust is determined to not meet the guidelines, you may have some options depending on the trust itself and how it was set up. You may have the option of taking the property out of the trust to yourself as an individual or amending the trust to ensure that it meets guidelines.
Can a property be taken out of a trust before or after I obtain a reverse mortgage?
Yes. If you are wanting to get a reverse mortgage and you no longer want the property vested in your trust, you may take the property out of the trust as long as you have the authority to do so. You will want to consult your tax professional to confirm if doing so would result in a tax liability. Once the reverse mortgage has closed, you have the option to take the title out of the trust, but not without obtaining approval from the mortgage company first. Guidelines require that you cannot transfer ownership of your property once the reverse mortgage has been taken out unless you get the sign off ahead of time. An unauthorized title transfer can result in the reverse mortgage being called due and payable.
Can I amend my trust after I get a reverse mortgage?
Yes, but you should notify the lender first. When you obtain a reverse mortgage loan for a property vested in a trust you must agree to notify the lender of certain changes related to the trust. Those changes include the death of the beneficiary, any change of occupancy by the beneficiary, any conveyance of the property or any transfer of the beneficiary’s interest in the property.
Can I obtain a reverse mortgage if I am a successor beneficiary of a trust?
No. In order to obtain a reverse mortgage on a property vested in a trust you must be a current beneficiary of the trust.
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